Dear friends
Once again in February, all major asset classes such as equities, bonds and gold all dropped at the same time. Only the US dollar was able to strengthen somewhat after initial fluctuations.
The main concern was still the inflation: while food prices rose less rapidly, housing and energy costs are still soaring. As a result, and to further combat inflation, the Federal Reserve raised interest rates again by 0.25% to 4.75%, the highest level since 2007. In addition, the Fed reiterated that interest rates are still “not sufficiently restrictive” and that the impact of previous hikes will determine the pace of further steps to bring inflation back to 2%.
Despite fears of recession due to higher import and energy costs, consumer sentiment improved modestly. Walmart’s sales, for example, increased a bit, although profits may fall for the second year in a row due to restrained consumer spending and higher supplier prices. There was some recovery in the travel industry as airline stocks strengthened, while long-term profitability remains unclear due to inflation and high fuel prices.
Technology stocks in cybersecurity, cloud computing, and e-payments saw a boost due to the rise of telecommuting and e-commerce, driving the Nasdaq to a new record high, although unfortunately a rather short-lived one.
The markets closed the month in the red with the Nasdaq at -1.1%, the S&P 500 at -2.6%, 20-year bonds at -4.8%, gold at -5.4%, and Bitcoin flat at 0.0%.
Our strategies performed similar to the markets in another bumpy month with Universal -1.8%, Progressive -3.1%, and CryptoMax -7.4%.
In Europe, both the Bank of England and the ECB raised their interest rates by 0.5%, which bodes well for no further hikes in March. In England, a GDP growth of 0% in the fourth quarter of 2022 narrowly avoided a recession, consumer confidence improved, and UK inflation fell for the third month in a row.
The economic climate in Germany also seemed to be more optimistic, with German consumers relieved at falling energy prices and the apparent avoidance of an inflation-triggered recession.
Japan unfortunately published rather gloomy GDP figures for the end of 2022, which were considerably below market expectations. This was mainly due to a decline in investment spending and inventories, while private consumption and external demand modestly improved.
In the crypto space, despite the current bitcoin slump, Banco do Brasil has just announced that it will allow its citizens to pay their taxes with cryptocurrencies. And El Salvador is opening a second bitcoin embassy in Texas, following the first one a few months ago in the Swiss city of Lugano.
As some may recall, the city of Zug in central Switzerland began accepting Bitcoin as payment for government services up to a value of CHF 200 (0.44 BTC at the time) in mid-2016. Today, these receipts would be worth 45x more! This was the first time globally that a cryptocurrency was accepted at the government level and made Zug internationally known as the “Crypto Valley”.
Sometimes small decisions and a little bit of patience can lead to amazing results…
Stay happy, healthy and wealthy!
Omar